A question that we are often asked is, "How much can the association or its management company charge for the work done to complete the association’s escrow disclosure requirements?" The Davis-Stirling Act, which governs California community associations, specifically covers document transfer disclosure when an association member is selling his or her property. The Code does not specify any limits on what can be charged for providing hard copies of all of the documents and disclosures. This has led to disputes. Fortunately, we have three appellate court decisions that have come down over the last decade that have clarified and confirmed what fees can be charged to owners and by whom.

It's that time of year again — time to get the community association's budget together and ensure you're making all the proper disclosures under the Annual Budget Report and Annual Policy Statement, as required by the California Civil Code. In order to assist you with this process and other required notices and disclosures, we have again updated our disclosure checklist reference.

Not much has changed in the most recent legislative session with regard to community association disclosures, other than some clarifying language that was added regarding property transfer disclosures. To review our prior blog post regarding that legislation, follow this link.

As you may be aware, Section 4530 establishes the responsibility of an association to provide copies of governing documents, certain financial disclosures and other documents to an owner, or any other recipient authorized by the owner, within 10 days of receipt of a written request for same. The requirement to provide documents and information applies to the sale of a unit (in a condominium building), lot (in a planned development) or stock (in a co-op). We would have liked to have seen a change here to delete “any other recipient authorized by owner”, as there are issues raised by the association providing transfer disclosure documents directly to parties other than owners, e.g., the association has no privity of contract with those parties. But for now, the current language will remain.

We regularly advise our association clients to include a disclaimer when directed by an owner to provide transfer disclosure documents directly to a third party: “These documents are being provided to you in the limited scope of complying with a request of the owner of the unit/lot for same in accordance with Civil Code Section 4525, et seq. The delivery of these documents to you shall not constitute establishment of privity between you and the association, and such delivery shall not create any further responsibility for the association with respect to further disclosure of documents to you.”

The body of statutory law (as opposed to case law) governing California Community Associations, known as the Davis-Stirling Common Interest Development Act, went into effect on January 1, 1986. As the industry developed and matured over the last 27 years, approximately 50 changes and amendments were made to the Act. While those adjustments were well-intended, the net effect yielded a disorganized and confusing body of law. To address this problem, a multi-year effort was launched to rewrite the Davis-Stirling Act. This “new” Davis-Stirling Act, signed into law in 2012, becomes the guiding law for California residential community associations on January 1, 2014. So you are probably asking what are the major changes and how does the re-write affect reserve funding issues? The answer is no major changes have been made regarding reserve funding. For the most part, the new updated law amounts to new set of Civil Code references for reserve funding matters. Fortunately, the majority of the changes are just re-organization and renumbering. But there have been changes made to the Act as it applies to reserves.

To read the article prepared by David Swedelson and Robert Nordlund, follow this link.

Have you seen our videos from our recent event, "What's New in the Davis-Stirling Act?" SwedelsonGottlieb Senior Partner Sandra Gottlieb explains it all for you - we've edited some video into sweet bite-sized sections. Follow the link below to access our videos and enjoy!

Disgruntled homeowner association members often want to share their “issues” with the other owners hoping to garner sympathy. They ask for the names and addresses for all owners, which the association will likely have to provide. But more and more, we are seeing owners asking to be provided other owners’ email addresses as well.

Neither the Davis-Stirling Act nor the Corporations Code provides much guidance to condo and homeowner associations regarding whether they are required to provide the email addresses of the members in response to another members’ request. However, a 2010 California appellate court case, Worldmark, the Club v. Wyndham Resort Development Corp. comes very close to answering that question.

Have you heard the latest regarding new required pool signage at California community association pools? Our attorneys have been receiving a lot of inquiries about whether a new “poop sign” is required to be posted at community associations that have pools. We have to report that a diarrhea sign is now required. In 2012, the California Building Standards Code (the “Code”) was amended, effective September 1, 2012. The Code states that it applies to “public pools.” At first glance, one would think that just as the Americans with Disabilities Act does not generally apply to community associations, as they are not “places of public accommodation”, the Code also does not apply to community associations. However, it is made clear in the scope of the Code that it applies to condominiums, townhomes, and homeowners associations. (See Section 3101B.)

Unless you have been sleeping with Rip Van Winkel for 20+ years (and if you have been, then maybe you have a disability), you are likely aware that there are a number of laws that deal with the rights of disabled individuals to be accommodated. This would include the Americans with Disabilities Act ("ADA") and the Federal Fair Housing Act ("FFHA") as well as California Fair Housing Act (“CFHA”). These laws deal with public and private facilities, and to some extent include condominium and homeowner associations. These laws address who is responsible for making modifications or changes to common area to accommodate individuals with disabilities - the owner or the association. It is important to understand the distinctions in the law, as many disabled individuals may insist that their community association is obligated to comply with the ADA, and that can be expensive as well as complicated. The fact is that the ADA likely does not apply to your association. See my prior article entitled Does the Americans with Disabilities Act (ADA) Apply to Your Association? Probably Not! and my latest article on this subject entitled Fair Housing and ADA — Dealing With The Legal Rights of Disabled Condo and HOA Residents. You may also wish to review our Fair Housing Outline.

Recent amendments to the Davis-Stirling Act have made it challenging for community association boards of directors to "deal" with important Association business. Don't know what I'm talking about? As of January 1, 2012, the California Legislature has imposed a prohibition on Boards taking action on any "item of business" outside of a properly noticed Board meeting. Obviously, the inability of a board to make "decisions" via email can restrict a Board's ability to make time sensitive decisions.

There are ways around this prohibition which would allow a Board of Directors to remain in compliance with the Civil Code. Specifically, Civil Code 1363.05 provides an exception to a board's ability to conduct business by excluding "those actions that the board has delegated to any person or persons (management, agent, officer of the association, or committee of the board comprising less than a majority of the directors). But there may be issues as to how much authority a committee actually has to make decisions that normally the board would be required to make.

A "committee of the board" is commonly referred to as an Executive Committee. Even though an Executive Committee is usually able to act for the board, it does not have to notice a meeting or otherwise comply with the Open Meeting Act.

I recently wrote an article for the California Association of Community Managers (CACM) Law Journal that addresses the ins and outs of Executive Committees. Follow this link to download a PDF of this important and timely article.

David Swedelson is a community association attorney and HOA lawyer. He can be contacted: dcs@sghoalaw.com

This is a busy time of year for community association managers and board members. For those associations whose fiscal year runs from January to December, and most do, it is budget time. But in addition to the budget, there are a number of other disclosure documents and notices that California condominium and homeowner associations are required to annually distribute to association members.

As we do each year, SwedelsonGottlieb has compiled a list of all of the documents and notices that are required to be prepared and distributed to owners on an annual basis. Follow this link to our checklist for 2012-2013. There were no changes to the Davis-Stirling Act regarding disclosures which apply this year or next year, and this list is not much different from last year's.

Apparently there are many of you out there that are not aware that as of January 2010, California community associations are permitted by law to distribute budget packages and most annual disclosure documents to owners electronically so long as owners give their written consent to receive them by email. Once that consent is obtained, budget distribution can become virtually paperless. To read the statute, follow this link for Civil Code § 1350.7. This statute was amended effective in 2010 to permit all notices listed in a new Index (read the statute) to be distributed electronically, by following the member consent requirements in the Corporations Code.

Detailed minutes can prove troublesome for your association. Minutes are required at any association or board meeting. They serve as a record of the actions and decisions made at a meeting; however, they are not meant to be a transcript of everything that was said or done at the meeting. The more unnecessary, superfluous detail that is included in board meeting minutes, the more likely the board’s actions will fall under unnecessary scrutiny by homeowners.

We are often asked by California community association board members and managers as to the records members have the right to inspect and copy. One record request that can prove problematic is when a member requests a list of an association’s members. Under Civil Code Section 1365.2(a)(1)(I), an association’s member can request a membership list for the association, including the association’s members’ names, property addresses at the association’s development and mailing addresses (if different than the property address), if (1) the member requesting the membership list states the purpose for the request, (2) that purpose is reasonably related to the member’s interests as a member of the association and (3) the association reasonably believes that the information on the membership list will be used for the purpose stated.

If the association reasonably believes that the membership list will be used for a purpose other than the member’s stated purpose, the association can deny the request. However, if the requesting member brings an action against the association for that denial, the burden will be on the association to prove that the member would have allowed use of the information for purposes unrelated to the member’s interest as a member of the association (which may be difficult to prove). We suggest that any board considering such a denial consult with association legal counsel before denying the request.

On July 11, 2011, the City of Pasadena passed a “no-smoking” ordinance for multi-family homes, defined as two or more units, applicable to both those now existing and to be built, effective January 1, 2012. The ordinance provides that it will be unlawful to smoke in any common area (broadly defined in the statute to include all areas other than a unit), patio, balcony or inside a unit within any multi-family building, and yes, this applies to condominiums.

As of January 1, 2012, owners and/or their community managers must post “No Smoking” signs, in capital letters, not less than one inch in height, on a contrasting background or, as an alternative, the association may post the international “no smoking” symbol instead of the written words, in the common areas of the association’s building(s) at first floor entrances and exits, lobbies, restrooms and elevators. The international “no smoking” symbol consists of a picture of a burning cigarette enclosed in a red circle with a red bar across it:

Further, effective January 1, 2012, all leases, rental agreements and purchase agreements (new or renewed, and this will apply to condominium associations and planned developments) must refer to the prohibition language in the ordinance and must provide a copy of the ordinance to the person or entity with whom they are contracting.

The actual enforcement of this ordinance will commence on July 1, 2013 and prohibit smokers from not only smoking on association common areas, but also within their condominium, which includes townhomes and, as it applies to non-association properties as well, rental and owned apartments. The ordinance will be enforced by the City, not by the associations.

If you are selling a home (unit condominium, townhome, etc.), you must include a reference to the “no smoking” ordinance in your purchase agreement, as well as include a copy of the ordinance. (Ordinance Section 8.78.080 Posting of Signs, and Section 8.78.085 Reduction of Drifting Tobacco Smoke in Multi-Unit Housing). Follow this link to view these ordinances.

As a final comment, the last sentence of the ordinance provides that “an owner, operator, manager, landlord, homeowners’ association or other person having control of a multi-unit housing unit shall post signs as required by Section 8.78.080; however, said persons may, but are not hereby required, to assist with enforcing the provisions of this section and shall not be deemed in violation of this section by failure to assist in its enforcement.” Fortunately, this clarifies that the City is not expecting homeowners associations to enforce the ordinance. It is imperative that Boards of Directors understand the extent and limits of their associations' obligations and not take on the enforcement obligations of the City.

It's fall, and that means that most community association board members and management are busy finalizing their budgets (this applies to most community associations that have a calendar fiscal year). Unlike the old days, the budget is not all that California community associations need to be concerned about. What about all those disclosures that are required annually? Are you sure that your association is in compliance? Never fear, SwedelsonGottlieb is here with our updated annual disclosure checklist. Follow this link for a PDF copy of our checklist which we provide annually, setting out all of the statutory disclosures that California community associations are required to provide to the owners/members.

Many California condominium associations have common area storage lockers, rooms or areas that are made available to the owners. Sometimes, the storage area is assigned in a deed as exclusive use common area. More often than not, these areas are not assigned, and the board has the ability to assign and rent them to owners. And boards and the association’s management often have no idea of the issues that storage areas can create until they are smack dab in the middle of a dispute with an owner.

There are many commercial self-service storage facilities that serve the general public; one of the more popular ones is called “Public Storage”. Although homeowner associations that rent storage spaces to their owners generally do so on a much smaller scale, when an association does rent out these areas to owners, it is considered to be a “self-service storage facility” as defined under the California Self-Service Storage Facility Act.

I just read an excellent article by Robert M. Nordlund, P.E., R.S. with Association Reserves, Inc. that addresses the issue of how much California condominium associations should be reserving. He starts out with the proposition that “[t]ypically (that is a dangerous word), most condominium associations should be setting aside 15% - 40% of their assessments towards Reserves. This ratio is lower for associations where each homeowner maintains their own home and the association is only responsible for some minimal common areas. Obviously, every association has its own unique list of common area assets it is responsible to maintain. Some may have a longer list that force higher Reserve contributions (pool, elevator, tennis court, balconies, wood siding, etc.), some may have shorter lists of amenities or more cost-efficient exterior finishes.”

Nordlund does go on to say that in addition to these physical factors, there are three other important influences to your reserve contributions: 1. Economic assumptions for interest and inflation; 2. Your current “starting point”, measured in terms of “Percent Funded”; and 3.Your Objective, full funding or baseline funding?

So what is the bottom line for your association? Don’t know? Don’t understand these terms? Then you need to read the entire article. Follow this link.

And if you have “legal” questions regarding reserves, contact David Swedelson via email: dcs@sghoalaw.com.

We are amazed by the number of board members and managers that do not know that there is a Vehicle Code Section (§22658) that addresses how and when California condominium and planned development community associations can tow vehicles that are not legally parked. Compliance with the Vehicle Code is required, and non-compliance could subject the Association to potential fines, legal liability and damages.

On January 1, 2007, changes and amendments to the provisions to California Vehicle Code §22658, relating to towing from private property, including common interest developments, went into effect. No longer can an association instruct security services or a towing service to tow vehicles that may not be authorized. Rather, the association must comply with the new stringent laws.

In an unpublished opinion, the California Court of Appeals, relying on the Supreme Court’s decision in Lamden, upheld a trial court ruling that a condominium association, acting in good faith and in the best interests of the community, can decide not to take action to stop water from intruding or leaking into a unit due to construction defects in common areas.

Jared Court, an 18 unit townhouse style condominium association located in Woodland Hills, California, is made up of four buildings and common area that includes a tennis court, swimming pool, concrete walkways, front patios and mature landscaping. The CC&Rs require that the Association "maintain the portion of the project not occupied by the units [the common area], in good, clean, attractive and sanitary order and repair."

From time to time we hear from association clients that are in a dispute with owners over documents that the owner wants to inspect or copy. They often want copies of the attorney's billing statements. The problem is that most attorneys are descriptive as to the nature of the services provided, and these narratives include confidential attorney-client privileged communications and are not for distribution.

In response to an owner's request to review the association’s legal bills, it is appropriate for the Board to respond denying the request on the basis that the legal bills are subject to the attorney-client privilege, and that a member’s right to review association documents does not extend to documents subject to the privilege. Yes, the Civil Code does say that the owners are entitled to see the contract between the association and the attorney. But the retainer agreement is not a billing invoice. And the owner is entitled to documents showing what the attorney has been paid; but not the billing invoice.

Support for this position is found in the Court of Appeal decision in the case of Smith vs. Laguna Sur Villas Community Assn. (2000) 79 Cal.App.4th 641. In that case, the court discussed how, as a corporation, it is the association who is the client, not the individual members. The Court went on to deny homeowners their request to review the association’s attorney bills in that matter as the bills contained confidential information relating to the services being performed by the association’s legal counsel.

California Civil Code Section 1365.2 states, “Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors or contractors.” Civil Code Section 1365.2 specifically excludes documents which are subject to the attorney-client privilege from a member’s right of review. Attorney billing statements contain detailed descriptions of the work performed by the attorney. If they were revealed, such statements could be used against the association in any pending litigation or other matters. As the Laguna Sur Villas Community Assn. Court points out, unlike directors, residents owe no fiduciary duties to one another and may be willing to waive or breach the attorney-client privilege for reasons unrelated to the best interests of the association.

If you have comments, send them to David Swedelson at dcs@sghoalaw.com

The Americans with Disabilities Act (“ADA”) recently celebrated its twenty (20) year anniversary. The ADA has had a significant impact on all of us by knocking down architectural construction barriers that had previously prevented people with disabilities from being able to access public facilities, for example by making sure that business entrances are wheelchair accessible, requiring that store aisles be widened, and mandating other modifications that provide people with disabilities the ability to access public buildings and public recreational facilities. However, despite what some homeowners will want their associations to believe, the ADA does not generally apply to California community associations. The purpose of the ADA has always been to provide people with disabilities access to public places, and community associations are, for the most part, private and not public.

In the winter of 2009, the Greater Los Angeles Chapter of Community Associations Institute published an article written by firm attorneys David C. Swedelson and Stephanie M. Rohde entitled “Does the Americans With Disabilities Act (“ADA”) Apply to Your Association? Probably Not!” Follow this link to read or download a copy of their article. And if you have any questions regarding whether the ADA applies to your California community association, please do not hesitate to contact David C. Swedelson, Esq., at dcs@sghoalaw.com or Stephanie M. Rohde, Esq., at smr@sghoalaw.com.

Don’t you wish that you could utilize e-mail or other new technology to disseminate important association documents? Maybe you can! Effective January 2010, Civil Code Section 1350.7 was amended to allow community associations to send certain documents to the owners via e-mail or other methods of electronic delivery. Our Senior Partner, Sandra Gottlieb, has prepared an article regarding electronic delivery and the amendment to Civil Code Section 1350.7. This article was published in the March/April 2010 edition of the O.C. View, the bi-monthly publication of the Orange County Chapter of the Community Associations Institute. Follow this link to read this important article.

It is October, and many association boards of directors and managers are in the process of preparing their associations' 2010 budgets and statutory disclosure mailings. As we have done every year for the last decade, we have posted SwedelsonGottlieb’s Annual Disclosure and Notice Checklist to assist you with that process. Even if you have already sent out your budget and disclosure package, you may want to review the checklist to make sure that you have not forgotten anything. Note that there are a few changes to statutes. For example, the Notice of Assessments, Foreclosures and Payment Plans pursuant to Civil Code Section 1365.1 has been modified. In addition, there are some new changes effective January 1, 2010 regarding the Assessment in Reserve Funding Disclosure Summary, the creation of a Disclosure Document Index, and other procedural changes. Please check our blog later this week for a summary of those new laws and their application to your associations.

Effective January 1, 2005, Assembly Bill 1836 changes the current requirements and process for Alternative Dispute Resolution, by amending the existing provisions of the Davis-Stirling Common Interest Development Act (“Act) and adding additional provisions to the Act. This Bill was introduced to enact recommendations made by the California Law Review Commission (CLRC). This new legislation requires that associations adopt some form of Internal Dispute Resolution process, as discussed below, and it also expands the scope of the disputes to which the Alternative Dispute Resolution processes must or can be applied within community associations.

Existing law requires that certain disputes be submitted to Alternative Dispute Resolution prior to a lawsuit being filed, either by a homeowner or by the association. This Bill establishes a two-tier process to address disputes prior to enforcement through the court system. As of 2005, associations are required to implement an informal process by which homeowners and boards "meet and confer" to discuss their disputes. The CLRC came to the conclusion that some association boards were not talking with homeowners regarding their disputes, and felt that by encouraging personal communication that many disputes would be resolved without court intervention.

If the dispute is not resolved through the informal “meet and confer” process, either the owner/member or the association must still submit the dispute to some form of formal Alternative Dispute Resolution (ADR) prior to filing a lawsuit in the Superior Court.

Assembly Bill 1836 amends Section 1354 of the Davis-Stirling Act to clarify that all governing documents, which include rules and regulations, Articles, Bylaws, as well as CC&Rs, may be enforced by any owner of a separate interest or by the association, or both. This change reinforces the concept recognized by the California Court of appeals in Beehan v Lido Isle Community Association that not all association disputes have to be enforced or resolved by the association.

As was the case prior to enactment of Assembly Bill 1836, neither associations nor homeowners are obligated to use the mandatory “meet and confer” and the ADR process for disputes involving a claim for monetary damages in excess of $5,000.00, Small Claims actions, or, except as provided in the Davis-Stirling Act, to assessment disputes.

This Bill also defines ADR as including mediation, arbitration, conciliation, or any other non-judicial procedure involving a neutral party in the decision-making process.

This new legislation also changes the requirements on how a Request for Resolution may be served. Previously, there was some ambiguity in the law regarding whether a Request for Resolution had to be personally served. The Court of Appeals addressed this ambiguity in the Cabrini Villas HOA case. Realizing that it was becoming difficult for associations to comply with the ADR service requirements, the new law states that the Request for Resolution may be made by personal delivery, first class mail, express mail, fax, or any other means that would reasonably be assumed to notify the receiving party.

AB 1836 also repeals the provisions of Court of Civil Procedure 383, and adds Section 1368.3 to the Civil Code in its place. Section 1368.3 provides that an association is entitled to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings in its own name as the real party interest without joining the individual owners in certain disputes.

AB 1836 also amends Civil Code Section 1357.120 to reflect that associations are required to adopt an internal procedure for dispute resolution and that any procedures to be adopted by the Board are subject to the notice and rule change requirements of Civil Code Sections 1357.130 and 1357.140. This Bill also adds two new requirements to Sections 1357.130 and 1357.140 (which are the sections adopted last year which require notice to members before the Board makes a rule change and allow members of an Association to reverse a rule change, respectively. Essentially, the amendments to Sections 1357.130 and 1357.140 require that the Internal Dispute Resolution process adopted by an association must comply with the requirements of Section 1357.100 et seq, which means that before it becomes the law of an association, it must first be distributed to the members, to allow them an opportunity to oppose the new procedure.

Associations Must Adopt a Procedure for Internal Dispute Resolution

AB 1836 requires that associations either establish their own procedures for Internal Dispute Resolution or use the procedure set forth in new Civil Code Section 1363.840. The procedures set forth in Section 1363.840 are as follows:

Either the association or a homeowner may request that the other meet and confer in an effort to resolve a dispute involving their rights, duties or liabilities under the Davis-Stirling Common Interest Development Act, the Nonprofit Mutual Benefit Corporation law, or the governing documents of the common interest development. The request must be in writing.

Either the homeowner receiving such a request from the association may refuse to meet and confer. However, if the association receives such a request from a homeowner, the association must accept the homeowner’s request to meet and confer.

The association’s board of directors must designate a member of the board to meet and confer with the homeowner.

The designated member of the board of directors and the homeowner shall meet promptly at a mutually convenient time and place; explain their positions to each other and confer in good faith in an effort to resolve this dispute.

Any resolution of the dispute agreed to by the designated member of the board of directors and the homeowner must be memorialized in writing and signed by the designated member of the board of directors and the homeowner.

The association has the option of using the above procedure or may adopt its own process. If the board of directors chooses to adopt its own process, the process is subject to the following:

The meet and confer process must be “fair and reasonable.”

The process must provide the right for either the association or a homeowner to invoke the process in writing.

The procedure must provide prompt deadlines.

The procedure must allow for the homeowner and the association to explain their positions and provide the right of appeal by the homeowner to the board of the association.

This new requirement of “a meet and confer” process is intended to foster communication, and that communication will not be binding on either the association or the disgruntled or rule-violating homeowner. Assuming the agreement made through the meet and confer process is in writing, that resolution may be judicially enforceable, as long as the resolution is not in conflict with the law or the governing documents of the community association, and the agreement is either consistent with the authority granted by the Board of Directors to its designated representative or is ratified by the Board of Directors.

In developing an Internal Dispute Resolution process, Civil Code Section 1363.820(b) requires associations to “make maximum, reasonable use of available local Dispute Resolution programs involving a neutral third party, including low-cost mediation programs, such as those listed on the internet web sites of the Department of Consumer Affairs, and the United States Department of Housing and Urban Development.”

Conceivably, the meet and confer process implemented by a Board of Directors could include use of a mediation service. However, this new law specifically states that no fee can be charged to the member for participating in the Board’s informal meet and confer process. Should the dispute not be resolved and be subject to the formal ADR process, the cost of the ADR will be shared equally by the association and the homeowner.

AB 1836 requires that associations annually provide the members with a summary that specifically states:

Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 1369.520 of the Civil Code may result in the loss of your right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.

The summary must be provided “either at the time the pro forma budget required by Civil Code Section 1365 is distributed, or in the manner prescribed in Section 5016 of the Corporations Code. The summary shall include a description of the association’s Internal Dispute Resolution process as required by Section 1363.850.”

Any new procedures adopted by the Board of Directors related to the Resolution of Disputes must comply with Civil Code Section 1357.130 and 1357.140, the procedure for enacting new rules (which, among other things, requires that the new rule or procedure be distributed to the members prior to becoming enforceable and allows members to vote to reverse a rule change).

Community managers and Board members are hard at work preparing their associations’ budgets and other required disclosure documents. As we do each year, Swedelson & Gottlieb is providing you with our 2004 Annual Disclosure Checklist.

The Checklist is in Adobe Acrobat PDF document format and can be downloaded by clicking on the following link. Download 2004ADC.pdf

Please contact our office at 800.372.2207 if you have any difficulties with the download.

Wondering where you can find sample annual meeting and secret ballot forms? Look no further. Click on the links below to find some handy reference.

These forms are provided as reference only and do not constitute legal advice. Swedelson and Gottlieb makes no representations as to whether these forms are suitable for any purpose. Consult an attorney before using any of these forms.

It comes up all the time. A resident wants to attend and participate at a board meeting or wants to serve on the board of directors. That resident may be a tenant or the significant other of an actual owner of that property, or perhaps the beneficiary of a trust or shareholder of a corporation that owns the property. Often, governing documents state that only an "owner of record" can serve on the board, and the Open Meeting Act states that "any member of the association may attend a meeting of the board of directors of the association." Electing a non-owner to the board of directors, when the governing documents require ownership as a qualification, could jeopardize the legality of the board's decisions, and perhaps even insurance coverage.

Black’s Law Dictionary defines an "owner" of real property as a person who is vested with title to property and has a right to enjoy that property and do with it as he or she pleases. The "Record Owner" is usually defined in the CC&Rs as the "owner of the Title" at the time of notice. But does this mean that the association is required to go out and check Title? Not necessarily. Typically, the owner of record at a community association is the owner on the association's records based on the information that was provided, perhaps through escrow, when the unit was sold. Some management company agreements obligate the manager to a higher level of record keeping by requiring that the manager keep not only a list of the homeowners, but rather a "current list." This rather innocuous phrase could actually place an ongoing obligation on the manager to verify correct ownership. If that's your intention, great; if not, contracts should be rephrased. The association is entitled to rely on its records, unless it is provided proof by way of a recorded deed, that ownership (in whole or in part) has been transferred to someone new. A resident may present the association with a copy of a quit claim deed, showing that he or she may own all or a portion of the property, but that deed may not have been recorded. Then that person would not necessarily be the "owner of record," at least not recognized by the County Recorder's Office as the owner, and thus should not be considered by the association to be an owner.

Record Owner

It is important to determine who the owner of the property is because many activities (read most) at common interest developments require the owner to be the Record Owner of the property. Only a Record Owner can make decisions on behalf of a unit/lot as it relates to association matters. Association disputes over ownership generally arise over the issue of "legal ownership" and are usually easily resolved by determining identity of the property owner as listed on the recorded grant deed.

Prior planning and organization should allow a board or manager to ascertain who the true Record Owner of the property is prior to mailing ballots or holding official meetings of the members. Most CC&Rs require homeowners to provide the association with the names and addresses of the Record Owners. In fact, Corporation Code Section 8320 places the obligation on the corporation or unincorporated non-profit association to maintain a list of all homeowners and their addresses. It is the association's obligation, even prior to an annual meeting, to ascertain who is the record owner for the purpose of collecting assessments and enforcing the governing documents. Because state statute provides that the levy of assessments is a debt of the owner at the time the assessment was levied, going after the correct owner for payment is important, not only to the association's financial health, but also to limit the association's liability for proceeding against the wrong person or entity for a debt.

Under California law, a recorded interest has priority over an unrecorded interest. That means if two owners claim a right of ownership to a piece of property, the association should treat the Record Owner, the person listed on the recorded grant deed, as the true owner. The same holds true even where a homeowner acquires title to their unit/lot by a quit claim deed, provided, of course, that the deed is recorded. When an unrecorded grant deed is involved or if more than one person claims a right of ownership under a separate recorded grant deed or a representative of a trust claims the ownership, the issue can become murky. If no recorded deed exists or more than one recorded deed is discovered. Management should, based on the Davis-Stirling Common Interest Development Act, refer to recorded interests only. Other statutes, not specific to homeowner associations, provide that a grant deed is valid and enforceable even if not recorded as long as the grant deed gives notice to all. However, what is more commonly found is that the notice of ownership has not been given to all prospective buyers and does not provide legal notice as required by law.

First In Time, First In Right

If there is an ownership dispute between record owners and management does not know who to allow to vote (who gets the ballot), management should rely on Civil Code Sections 1213 through 1220, which provide, when more than one grant deed exists, the "Record Owner" will be the person(s) whose grant deed was recorded first. For example, if a homeowner were to record her or his deed to a unit/lot in 2002 and a subsequent grant deed for that same unit/lot was recorded by another person in 2003, without there being a chain of title that satisfies the transfer of property, the Record Owner would be the homeowner who recorded first.

Trust Ownership

A problem occurring more and more frequently arises when property is owned in trust. When conducting check in at an official meeting or sending out a written ballot, if a trust ownership is presented, the association should require official verification that the person who wants to vote on behalf of the trust is authorized to do so. The individual is usually the trustee of the trust. Interestingly, although the trustee does not own the property, the trustee has the same legal rights to act on behalf of the property as those that would be afforded any other ownership rights of the association. It is incumbent upon associations to advise homeowners that, if they are a trustee of a trust, they need to provide trust documentation to establish that they have the authority as referenced above.

Most times it seems the ownership issue is a problem only in contested elections or when certain members of the association have an agenda. Management's agenda is to make sure the right owners are representing the memberships in the association. Following the above guidelines will guarantee your success.